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Where Japan’s new growth could come from

I’ve just two days ago returned from a visit to Japan, where I met with people from an incredible diversity of companies while giving talks and directing the Columbia Business School Program “Creating Strategy”. Although it’s standard commentary now to bemoan lack of creativity in Japanese companies, I had a different take on the issue. It struck me forcibly that the very habits that make it hard for Japanese companies to sustain a great deal of diversity in thinking and behavior might prove to be a godsend in the area of services. Think about it: to create a massively profitable, service based business, a firm either has to generate substantial margins from a few large clients (as IBM tries to do), or it has to figure out how to capture scale in services.Scaling up a service business, as anyone who’s ever tried to provide customers with a uniform service experience can tell you, can be really tough. Here’s where Japan’s potential advantage comes in: once a procedure is in place, there is enormous cultural and habitual support for continuing it more or less unchanged. While that may not be so great if you are after divergent thinking, it could be a godsend when what you need the same reliable, repetitive actions no matter where your company is operating.

So let Japanese companies figure out that similar techniques that have made them such fearsome manufacturing competitors will offer advantages in services, and we could be seeing a whole new wave of Japan-led innovation. An interesting example of this next wave of Japanese competition might be the company Recruit. The firm covers job recruitment, as the name suggests, but also publishes and engages in other service businesses, and publishes a large number of magazines and other popular publications.

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